The first week of trading in 2016 has gone into the books as the worst opening week in history. First of all, we`ll look at some of the key figures from the oil and gas industry.

The first trading week of 2016 was dominated by negative sentiment, mostly surrounding the stock market instability in China. China’s Shanghai Composite had to be shuttered twice this week because plummeting stocks triggered the “circuit breaker,” a mechanism that closes the markets to prevent panic selling. The composite capped off the dismal week with more stable trading; the composite was up 2 percent on Friday.

Another concern is the value of the yuan. The currency has been under pressure from the slowing economy, but the weaker yuan is raising concerns about so many other emerging market currencies around the world, some of which may be forced to devalue in corresponding fashion with the yuan. The Chinese government has not exactly inspired confidence in a stable currency policy after repeatedly shifting its tone. "Market volatility this week suggests that nobody really knows what the policy is right now. Or if the government itself knows or is capable of implementing the policy even if there is one," DBS Bank wrote in a currency note on January 8. "The market`s message was loud and clear that more clarity and less flip-flopping is needed going forward."

The cracks in the Chinese stock market surpassed the geopolitical turmoil between Saudi Arabia and Iran in terms of the effect on oil prices. WTI and Brent slumped below $34 per barrel to close out the week, the lowest level in 12 years. The prices are so low that a growing number of oil producers will not even be able to turn a profit even at existing projects. Some oil sands projects in Canada are already looking to shut down.

Meanwhile, the Saudi-Iran conflict is showing some signs of escalation. Iran accused Saudi Arabia of hitting its embassy in Yemen with an airstrike, although witnesses say that the strike hit nearby and only shrapnel may have hit the embassy. While direct military confrontation remains a remote possibility, tensions continue to heat up in the Middle East.

Saudi Arabia is looking at a variety of options to raise new funds and the deputy crown prince made a huge splash in the media when he revealed that the government is considering an IPO of Saudi Aramco. In an interview with The Economist deputy crown prince Muhammad bin Salman said that listing some shares in Saudi Aramco, the world’s largest oil company by production, is “something that is being reviewed.” He then added, “[p]ersonally I’m enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”

The oil industry will likely continue to suffer in 2016, and even the oil majors will be forced to make decisions about their deteriorating financial positions. For example, in the first half of 2015 spending, share buybacks and dividends exceeded cash flow for the oil majors by a combined $20 billion. While cost reductions have been made since then, the oil price is now lower than it was a year ago. Deeper spending cuts could yet be issued by the oil majors in 2016 as nearly all of them vow not to cut dividends.

Noble Group Ltd., the Hong Kong-based commodities trading house, was downgraded by S&P, sparking a much deeper sell off of the company’s shares. The trader has been slammed by the collapse in commodity prices, and the financial turmoil in China’s stock markets are putting a lot more pressure on the company. S&P slashed Noble’s credit rating from BBB- to BB+, with the credit ratings agency did not rule out future downgrades. Moody’s did the same in December. Investors are growing concerned about the possibility of a liquidity event. S&P warned that the firm’s “capital raising could be complicated by depressed" commodity markets.

The small oil and gas driller Sandridge Energy was delisted from the NYSE this week after its share price cratered to just 15 cents per share. The Oklahoma-based E&P firm was also in the news this week after it rebuffed requests from Oklahoma regulators to cut back on wastewater injections that are thought to contribute to the state’s increase in earthquake activity. Sandridge was desperate not to interrupt its operations because of its precarious financial state, but now the company is off the NYSE. Also, the company’s stubbornness may provoke a harder line by state regulators on wastewater disposal, potentially leading to mandatory limits.

A state of emergency was finally declared in California over the inability of Southern California Gas Co. to get a handle on the natural gas leak in an area just northwest of Los Angeles. A gas storage facility deep underground has been leaking plumes of natural gas into the air since October, forcing evacuations of residents nearby. SoCalGas may not be able to plug the leak for a few more months, causing outrage in the general public. California’s Governor Jerry Brown declared a state of emergency. SoCalGas, a subsidiary of Sempra Energy (NYSE: SRE), says that it has already spent $50 million trying to stop the leak as well as from the costs associated with reimbursing residents for relocation. The cost figures were submitted to the SEC, and the company says that it will continue to incur the costs, although it does have insurance that might cover some of those expenses, plus the costs associated with the inevitable litigation. A solution to the gas leak may not come until at least March.

Royal Dutch Shell (NYSE: RDS.A) received approval from Canadian regulators for a 40-year export license of LNG from its proposed terminal on Canada’s Pacific Coast. A litany of LNG export terminals have been proposed for British Columbia, hoping to export natural gas from the prolific Montney shale in Alberta to hungry customers in East Asia. Shell and its consortium partners welcomed the license approval, but will wait to later this year to make a final investment decision on whether or not to move forward. The terminal will take five years to construct and could be up and running by 2022.

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